<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
P. H. Glatfelter Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[P.H. GLATFELTER LOGO]
P. H. GLATFELTER COMPANY
96 SOUTH GEORGE STREET, SUITE 500
YORK, PENNSYLVANIA 17401
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 26, 2000
---------------------
TO THE SHAREHOLDERS:
The 2000 annual meeting of shareholders of P. H. Glatfelter Company will be
held at the company's Spring Grove mill, 228 South Main Street, Spring Grove,
Pennsylvania, on Wednesday, April 26, 2000 at 10:00 a.m. for the following
purposes:
1. To elect three members of the Board of Directors to serve for full
three-year terms expiring in 2003;
2. To consider two shareholder proposals; and
3. To transact such other business as may properly come before the
meeting.
Only holders of record of the company's common stock at the close of
business on March 1, 2000 will be entitled to notice of and to vote at the
annual meeting.
It is important that your shares be represented and voted at the annual
meeting. Whether or not you currently plan to attend the meeting, please
complete, date and sign the accompanying proxy card and return it promptly in
the enclosed, self-addressed envelope requiring no postage if mailed in the
United States. If you choose, you may still vote in person at the meeting even
though you previously submitted a proxy card.
/s/ M.R. MUELLER
M. R. MUELLER,
Secretary
March 24, 2000
<PAGE> 3
P. H. GLATFELTER COMPANY
PROXY STATEMENT
This proxy statement and the accompanying proxy card are being solicited by
the Board of Directors of P. H. Glatfelter Company (the company), 96 South
George Street, Suite 500, York, Pennsylvania 17401, in connection with the 2000
annual meeting of shareholders of the company (the annual meeting or meeting).
This proxy statement and the accompanying proxy card are being mailed to the
company's shareholders on or after March 24, 2000.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the annual meeting, shareholders will act upon the following matters:
- electing three directors of the company, each to serve for a three-year
term expiring at the company's 2003 annual meeting;
- considering two shareholder proposals; and
- transacting any other business that may properly be brought before the
meeting.
In addition, the company's management will report on the company's business
during fiscal year 1999 and respond to questions from shareholders.
WHO IS ENTITLED TO VOTE AT THE MEETING?
Only holders of record of the company's common stock at the close of
business on the record date, March 1, 2000, are entitled to receive notice of
and to vote at the meeting. Each share of the company's common stock is entitled
to one vote per share on all business presented at the meeting, except that
shareholders have cumulative voting rights in electing directors. Cumulative
voting means that each shareholder is entitled to as many votes in electing
directors as is equal to the number of his or her shares of common stock
multiplied by the number of directors to be elected. A shareholder may cast all
such votes for a single nominee or may distribute them between two or more
nominees as he or she sees fit. The persons named in the accompanying proxy card
as proxy holders will have the right to vote cumulatively and to distribute
their votes among the nominees as they see fit.
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and return it
to the company, it will be voted as you specify. If you are a holder of record
of the company's common stock on the record date and attend the meeting, you may
deliver your completed proxy card in person or vote in person at the meeting.
The votes will be counted by judges of election appointed by the company.
WHAT CONSTITUTES A QUORUM?
A quorum is necessary to permit a particular matter to be considered and
acted upon at the meeting. The presence at the meeting, in person or by proxy,
of shareholders entitled to cast at least a majority of the votes that all
shareholders are entitled to cast on a particular matter will constitute a
quorum for the purposes of such matter. The company had 42,411,000 shares of
common stock outstanding on the record date.
<PAGE> 4
WHAT VOTE IS REQUIRED TO ELECT A DIRECTOR AND TO APPROVE A SHAREHOLDER PROPOSAL?
Election of Directors. The three nominees for director receiving the
highest number of votes cast, in person or by proxy, by shareholders entitled to
vote thereon will be elected to serve on the Board. Votes withheld with respect
to the election of a director will not be voted with respect to such director,
although they will be counted in determining whether there is a quorum.
Accordingly, votes withheld will have no effect on the result of the vote.
Shareholder Proposals. The approval of each shareholder proposal requires
the affirmative vote of the holders of a majority of the shares entitled to vote
thereon, represented in person or by proxy. Abstentions with respect to a
shareholder proposal will be counted as present for purposes of determining
whether there is a quorum, but will not be counted as votes cast. Accordingly,
an abstention will have the effect of a negative vote. Broker non-votes (shares
held by a broker or nominee as to which the broker or nominee does not have the
authority to vote on a particular matter) with respect to a shareholder proposal
will not be counted as present for purposes of determining whether there is a
quorum and will not be voted. Accordingly, broker non-votes will have no effect
on the result of the vote.
HOW DOES DISCRETIONARY VOTING AUTHORITY APPLY?
If you sign and return the accompanying proxy card, but do not make any
selections, you give discretionary authority to the persons named as proxy
holders in the proxy card. Your shares will then be voted as indicated in this
proxy statement.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
The Board of Directors recommends a vote:
- FOR election of the three nominees for director, Robert E. Chappell,
George H. Glatfelter II and Richard L. Smoot, for terms expiring in 2003;
and
- AGAINST approval of each of the two shareholder proposals.
Unless you give other instructions on the accompanying proxy card, the
persons named in the proxy card as proxy holders will vote in accordance with
the recommendations of the Board.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy card, you may change your
vote at any time before the proxy is exercised by filing with the company's
secretary either a notice of revocation or a duly executed proxy bearing a later
date. The powers of the proxy holders to vote your proxy will be revoked if you
attend the meeting in person and request to change your vote or vote in person,
although attendance at the meeting will not by itself revoke a previously
granted proxy.
WHO BEARS THE COST OF SOLICITATION OF PROXIES?
The company bears the cost of preparing, printing, assembling and mailing
this proxy statement and other proxy solicitation materials. In addition to the
solicitation of proxies by mail, some of the officers and other employees of the
company may solicit proxies personally, by telephone and by other means. These
persons receive no special compensation for any solicitation activities.
WHEN ARE SHAREHOLDER PROPOSALS DUE FOR THE 2001 ANNUAL MEETING?
To be included in the proxy statement for the company's 2001 annual
meeting, shareholder proposals must be submitted in writing to the company's
secretary no later than December 1, 2000. If any shareholder proposal is
submitted after February 14, 2001, the company will be allowed to use its
discretionary voting
2
<PAGE> 5
authority when the proposal is made at the company's 2001 annual meeting,
without any discussion of the matter in the proxy statement for that meeting.
WHO ARE THE COMPANY'S AUDITORS?
In accordance with the recommendations of the company's Audit Committee,
the Board of Directors has appointed Deloitte & Touche LLP, independent
certified public accountants, to audit the consolidated financial statements of
the company and its consolidated subsidiaries for the year ending December 31,
2000. A representative of Deloitte & Touche is expected to attend the annual
meeting, will be given the opportunity to make a statement if he or she desires
to do so and will be available to respond to appropriate shareholder questions.
ELECTION OF DIRECTORS
Three directors are to be elected at the annual meeting to serve three-year
terms expiring on the date of the company's 2003 annual meeting and until their
respective successors are elected and qualified. The Board of Directors proposes
that Robert E. Chappell, George H. Glatfelter II and Richard L. Smoot, all of
whom are currently serving as directors of the company, be re-elected as
directors. The nominees have consented to serve if elected to the Board. If a
nominee is unable to serve as a director at the time of the meeting, an event
which the Board does not anticipate, the persons named in the accompanying proxy
card will vote for such substitute nominee as may be designated by the Board,
unless the Board reduces the number of directors accordingly.
BOARD OF DIRECTORS
The following table sets forth information as to the nominees and the other
persons who are to continue as directors of the company after the annual
meeting. The offices referred to in the table are offices of the company unless
otherwise indicated. For information concerning the number of shares of the
company's common stock owned by each director and all directors and executive
officers as a group as of March 1, 2000, see "Ownership of Common Stock."
<TABLE>
<CAPTION>
YEAR FIRST PRINCIPAL OCCUPATION AND
ELECTED A BUSINESSES DURING LAST FIVE
NAME AGE DIRECTOR YEARS AND CURRENT DIRECTORSHIPS
---- --- ---------- -------------------------------
<S> <C> <C> <C>
Nominees to be elected for terms expiring in 2003:
Robert E. Chappell 55 1989 Chairman and Chief Executive Officer, Penn
Mutual Life Insurance Company, since January
1997; President and Chief Executive Officer,
Penn Mutual Life Insurance Company, from April
1995 to December 1996; President and Chief
Operating Officer, Penn Mutual Life Insurance
Company, prior to April 1995; Director of
Quaker Chemical Corporation
George H. Glatfelter II(1) 48 1992 President and Chief Executive Officer since
June 1998; Senior Vice President from September
1995 to June 1998; Vice President -- General
Manager, Glatfelter Paper Division prior to
September 1995
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
YEAR FIRST PRINCIPAL OCCUPATION AND
ELECTED A BUSINESSES DURING LAST FIVE
NAME AGE DIRECTOR YEARS AND CURRENT DIRECTORSHIPS
---- --- ---------- -------------------------------
<S> <C> <C> <C>
Richard L. Smoot 59 1994 President and Chief Executive Officer, PNC
Bank, National Association, Philadelphia/South
Jersey markets, since October 1995; President
and Chief Executive Officer, PNC Bank, National
Association, Philadelphia, prior to October
1995; Director of Philadelphia Suburban
Corporation
Directors continuing for terms expiring in 2002:
Nicholas DeBenedictis 54 1995 Chairman and Chief Executive Officer of
Philadelphia Suburban Corporation; Director of
Philadelphia Suburban Corporation, Met-Pro
Corp. and Provident Mutual Life Insurance
Company
Patricia G. Foulkrod(1) 55 1999 Community volunteer
George H. Glatfelter(1) 73 1970 Retired; former Vice
President -- Manufacturing, Spring Grove mill
M. A. Johnson II 66 1970 Retired; former Executive Vice President,
Treasurer and Chief Financial Officer
Directors continuing for terms expiring in 2001:
Roger S. Hillas 72 1964 Retired; Chairman and Chief Executive Officer,
Meritor Savings Bank, prior to December 1992;
Director of Toll Bros., Inc.
Robert P. Newcomer 51 1998 Executive Vice President and Chief Financial
Officer since June 1998; Senior Vice President
and Chief Financial Officer from October 1995
to June 1998; Vice President, Treasurer and
Chief Financial Officer from January 1995 to
October 1995; Vice President and Treasurer
prior to January 1995
Paul R. Roedel 72 1992 Retired; Chairman and Chief Executive Officer,
Carpenter Technology Corporation, manufacturer
of specialty metals, prior to July 1992
John M. Sanzo 50 1992 Private Financial Consultant since June 1994;
President, Edison Control Corporation,
manufacturer of circuit indicators for electric
utility industry, prior to June 1994
</TABLE>
- ---------------
(1) Patricia G. Foulkrod is the niece of George H. Glatfelter and the first
cousin of George H. Glatfelter II. George H. Glatfelter is the father of
George H. Glatfelter II.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
HOW OFTEN DID THE BOARD MEET DURING 1999?
The Board of Directors held six meetings during 1999. Each of the incumbent
directors attended at least 75% of the aggregate of all meetings of the Board
and committees thereof on which he or she served in 1999.
4
<PAGE> 7
WHAT COMMITTEES HAS THE BOARD ESTABLISHED?
The standing committees of the Board are the Executive Committee, the Audit
Committee, the Compensation Committee, the Finance Committee, the Nominating
Committee and the Employee Benefits Committee. The members of all of these
committees are appointed by the Board.
Executive Committee. The Executive Committee consists of six members of
the Board: G. H. Glatfelter, G. H. Glatfelter II, R. S. Hillas, M. A. Johnson
II, T. C. Norris and R. L. Smoot. The Executive Committee has the authority to
exercise all of the powers of the Board of Directors between meetings of the
Board, except the power to amend the company's by-laws, submit matters to
shareholders for approval, create or fill vacancies on the Board and repeal or
modify any prior action of the Board that by its terms can be repealed or
amended only by the Board. The Executive Committee held one meeting during 1999.
Audit Committee. The Audit Committee consists of five members of the
Board: R. E. Chappell, N. DeBenedictis, R. S. Hillas, P. R. Roedel and J. M.
Sanzo, none of whom are members of the company's management. Generally, the
Audit Committee (i) recommends to the Board of Directors the independent
accountants to be appointed for the company, (ii) meets with the independent
accountants, the chief internal auditor and corporate officers to review matters
relating to corporate financial reporting and accounting procedures and
policies, adequacy of financial, accounting and operating controls and the scope
of the audits of the independent accountants and internal auditors, including in
the case of the independent accountants, the fees for such services and (iii)
reviews and reports on the results of such audits to the Board. The Audit
Committee held two meetings during 1999.
Compensation Committee. The Compensation Committee consists of five
members of the Board: R. E. Chappell, N. DeBenedictis, R. S. Hillas, P. R.
Roedel and R. L. Smoot, none of whom are members of the company's management.
The responsibilities of the Compensation Committee are described below (see
"Report of Compensation Committee on Executive Compensation"). The Compensation
Committee held two meetings during 1999.
Finance Committee. The Finance Committee consists of six members of the
Board: P. G. Foulkrod, G. H. Glatfelter II, M. A. Johnson II, R. P. Newcomer, T.
C. Norris and J. M. Sanzo. The Finance Committee is responsible for overseeing
the company's financial affairs and recommending such financial actions and
policies, including those with respect to dividends, as are most appropriate to
accommodate the company's operating strategies while maintaining its sound
financial condition. The Finance Committee held three meetings during 1999.
Nominating Committee. The Nominating Committee consists of five members of
the Board: G. H. Glatfelter II, R. S. Hillas, T. C. Norris, J. M. Sanzo and R.
L. Smoot. The responsibilities of the Nominating Committee include the
identification and recruitment of effective candidates for nomination as
directors and officers of the company. The Nominating Committee held one meeting
during 1999. The Nominating Committee will consider as nominees for election to
the Board persons recommended by the holders of common stock of the company. Any
shareholder desiring to recommend a nominee for election at the 2001 annual
meeting of shareholders should submit such nomination in writing to the
secretary of the company by December 1, 2000.
Employee Benefits Committee. The Employee Benefits Committee consists of
three members of the Board, G. H. Glatfelter II, R. P. Newcomer and T. C.
Norris, and two officers of the company, J. R. Anke and R. S. Wood. The
responsibilities of the Employee Benefits Committee include the general overview
of the provisions of various pension plans of the company and periodic review of
pension fund performance. The Employee Benefits Committee is also responsible
for administering the company's various profit sharing, 401(k) savings and stock
ownership plans and for conducting a periodic review of profit sharing and
savings plan fund performance. The Employee Benefits Committee held two meetings
during 1999.
5
<PAGE> 8
DIRECTOR COMPENSATION
HOW ARE DIRECTORS COMPENSATED?
Base Compensation. The company pays non-employee directors an annual
retainer fee of $12,500 (the retainer). In addition, the company pays
non-employee directors $1,000 for every board meeting attended plus $800 for
every committee meeting attended. The company also pays non-employee committee
chairpersons an annual committee-related retainer of $2,500.
Deferred Compensation. Pursuant to the company's Deferred Compensation
Plan for Directors (the plan), every year each director may elect to defer 50%,
75% or 100% of his or her retainer to be earned in that year and following
years. For each director who participates in the plan, the company will credit a
deferred fee account with phantom shares of the company's common stock (stock
units) at such time as the retainer would otherwise have been paid. The number
of stock units credited to a director's deferred account is the quotient of the
amount of the deferred retainer divided by the fair market value of the
company's common stock on such date. Additional stock units are credited to each
director's account as of each payment date for dividends on the company's common
stock, based on the number of stock units credited to a director's account on
the record date for such dividends. Once a participant in the plan ceases to be
a member of the Board of Directors, such participant is entitled to receive an
amount in cash equal to the product of the number of stock units credited to his
or her deferred account multiplied by the fair market value of the company's
common stock, payable in lump sum or in installments.
Options. Each non-employee director automatically receives, on May 1st of
each year, non-qualified stock options to purchase 1,500 shares of common stock
of the company for a purchase price per share equal to the fair market value per
share of the common stock of the company on the date such options are granted.
The options vest in full on the first anniversary of the date of the grant and
expire on the earlier of the date on which the optionee ceases to be a member of
the Board of Directors and ten years from the date of the grant; provided,
however, that (i) in the event of the optionee's retirement from the Board, such
options are exercisable until the first to occur of five years from the date of
such retirement and ten years from the date of the grant and (ii) in the event
that an optionee ceases to be a member of the Board by reason of death or
disability, such options are exercisable until the first to occur of one year
from the date of such death or disability or ten years from the date of the
grant.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
from the company and its subsidiaries which was awarded to, earned by, or paid
to the chief executive officer of the company and each of the company's four
other most highly compensated executive officers in 1999:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------- ------------------------- -------------
NAME AND RESTRICTED SECURITIES
PRINCIPAL POSITION FISCAL STOCK UNDERLYING LTIP ALL OTHER
AT DECEMBER 31, 1999 YEAR SALARY($) BONUS($)(1) AWARDS($)(2) OPTIONS PAYOUTS($)(3) COMPENSATION($)(4)
- -------------------------- ------ --------- ----------- ------------ ---------- ------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
G. H. Glatfelter II....... 1999 377,580 251,296 -- 59,400 74,910 0
President and Chief 1998 254,580 63,459 -- 81,196 92,293 0
Executive Officer 1997 191,580 97,468 -- 12,930 0 0
T. C. Norris.............. 1999 418,658 325,480 -- 33,300 0 4,825
Chairman 1998 418,658 165,518 -- 200,000 366,250 4,825
1997 409,250 274,807 -- 100,000 317,500 4,775
R. P. Newcomer............ 1999 277,884 150,606 -- 32,700 74,910 4,825
Executive Vice President 1998 224,880 61,600 -- 50,720 107,960 4,825
and Chief Financial 1997 191,880 97,596 -- 12,930 0 4,750
Officer
R. S. Lawrence............ 1999 220,104 90,767 -- 16,000 43,382 4,800
Vice President-- 1998 201,054 28,513 -- 27,347 92,293 4,800
General Manager, 1997 181,620 23,108 -- 7,490 0 4,750
Ecusta Division
Leland R. Hall............ 1999 190,008 98,121 -- 16,000 37,717 4,825
Vice President-- 1998 164,035 35,305 -- 25,027 0 4,825
General Manager, 1997 148,995 62,171 -- 6,510 0 4,750
Glatfelter Paper
Division
</TABLE>
- ---------------
(1) Reflects distributions under a broad-based profit sharing plan payable to
all salaried employees and bonuses under the Management Incentive Plan for
executive officers and other senior level employees.
(2) At December 31, 1999, Messrs. Glatfelter, Newcomer, Hall and Lawrence held
in the aggregate restricted stock awards for 33,960, 18,711, 9,166 and 9,166
shares of common stock, respectively. At December 31, 1999, the fair market
value of the shares subject to awards held by Messrs. Glatfelter, Newcomer,
Lawrence and Hall was $494,543, $272,479, $133,480 and $133,480,
respectively. Restricted stock will vest at the end of the fourth year after
it is awarded. With respect to Messrs. Glatfelter, Newcomer, Lawrence and
Hall, an amount equal to the cash dividends per share paid on the company's
common stock during the four-year period shall accrue with respect to each
share of restricted stock and be payable at the end of the four-year period.
Further information concerning restricted stock awarded in 1999 is set forth
under "Long-Term Incentive Plan Awards."
(3) For 1998 and 1999 with respect to Messrs. Glatfelter, Newcomer and Lawrence,
represents the payout for performance shares which were awarded in 1995 and
1996, respectively, and for 1999 with respect to Mr. Hall, represents the
payout for performance shares which were awarded in 1996, pursuant to the
1992 Key Employee Long-Term Incentive Plan, for the four-year performance
periods ended December 31, 1998 and 1999, respectively. For 1997 and 1998
with respect to Mr. Norris, reflects payouts of awards
7
<PAGE> 10
made in 1991, which vested on May 1, 1997 and 1998, respectively, pursuant
to the 1988 Restricted Common Stock Award Plan.
(4) Other compensation reported for 1999 represents (a) matching contributions
under the company's 401(k) Savings Plan and (b) in the case of Mr. Norris,
Mr. Newcomer and Mr. Hall the $25 payable to them as employees at the
company's Spring Grove mill with service in excess of 25 years.
OPTION GRANTS
The following table sets forth information concerning the number of options
granted during 1999 and the value of unexercised options to purchase common
stock held by the named executive officers at December 31, 1999. Under the terms
of the stock options granted during 1999, none of the options were exercisable
until 2000.
OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
% OF
NUMBER OF TOTAL
SECURITIES OPTIONS GRANT
UNDERLYING GRANTED TO EXERCISE DATE
OPTIONS EMPLOYEES PRICE EXPIRATION PRESENT
NAME GRANTED(#) DURING 1999 ($/SH)(1) DATE VALUE($#)
---- ---------- ----------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
G. H. Glatfelter II.............. 59,400(1) 12.2 13.28 12/13/09 231,681(2)
T. C. Norris..................... 33,300(1) 6.8 13.28 12/13/09 129,991(2)
R. P. Newcomer................... 32,700(1) 6.7 13.28 12/13/09 127,639(2)
R. S. Lawrence................... 16,000(1) 3.3 13.28 12/13/09 62,497(2)
L. R. Hall....................... 16,000(1) 3.3 13.28 12/13/09 62,497(2)
</TABLE>
- ---------------
(1) With respect to Mr. Norris, the options were granted on December 14, 1999
and are exercisable in full on July 1, 2000. Upon retirement Mr. Norris may
exercise these options until the first to occur of five years from the date
of his retirement or December 13, 2009. With respect to the other named
executive officers, the options were granted on December 14, 1999 and are
exercisable with respect to 25% of the total number of shares subject to
option on each of January 1, 2001 and January 1 of the following three
years. Upon retirement, the grantees may exercise these options until the
first to occur of three years from the date of such retirement or December
13, 2009.
(2) The estimated present value at grant date of options granted on December 14,
1999 has been calculated using the Black-Scholes option pricing model, based
upon the following assumptions: estimated time until exercise: ten years; a
risk-free interest rate of 6.28%, representing the interest rate on a U.S.
Government zero-coupon bond on the date of grant with a remaining term
corresponding to the expected life of the options; a volatility rate of
0.2849%; and a dividend yield of 5.37% representing the current $0.70 per
share annualized dividends divided by the fair market value of the common
stock on the date of grant. The approach used in developing the assumptions
upon which the Black-Scholes valuation was done is consistent with the
requirements of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation."
8
<PAGE> 11
YEAR-END OPTION VALUES
The following table sets forth information concerning options exercised in
1999 and the value of unexercised options to purchase common stock held by the
named executive officers at December 31, 1999.
AGGREGATED OPTION EXERCISES IN 1999
AND OPTION VALUES AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT 12/31/99 OPTIONS AT 12/31/99($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
G. H. Glatfelter II.... 0 n/a 60,465 147,091 0 226,695
T. C. Norris........... 0 n/a 245,000 133,300 0 264,624
R. P. Newcomer......... 0 n/a 63,115 89,915 0 124,862
R. S. Lawrence......... 0 n/a 52,428 46,780 0 61,122
L. R. Hall............. 0 n/a 35,596 45,296 0 61,122
</TABLE>
- ---------------
(1) Value is measured by the difference between the closing price for the
company's common stock on the New York Stock Exchange on December 31, 1999
and the exercise price of the option.
LONG-TERM INCENTIVE PLAN AWARDS
The following table sets forth information concerning the number of shares
of restricted stock granted in 1999 under the company's 1992 Key Employee
Long-Term Incentive Plan.
LONG-TERM INCENTIVE PLAN AWARDS IN 1999
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NUMBER OF PERFORMANCE OR NON-STOCK PRICE BASED PLAN
SHARES, UNITS OTHER PERIOD ---------------------------------
OR OTHER UNTIL MATURATION THRESHOLD TARGET MAXIMUM
NAME RIGHTS OR PAYOUT SHARES(#) SHARES(#) SHARES(#)
---- ------------- ---------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
G. H. Glatfelter II............... 17,440(1) 4 years(2) -- 17,440 --
T. C. Norris...................... 0 -- -- -- --
R. P. Newcomer.................... 9,610(1) 4 years(2) -- 9,610 --
R. S. Lawrence.................... 4,710(1) 4 years(2) -- 4,710 --
L. R. Hall........................ 4,710(1) 4 years(2) -- 4,710 --
</TABLE>
- ---------------
(1) Represents restricted stock awarded in 1999 under the 1992 Key Employee
Long-Term Incentive Plan that will vest at the end of four years, subject to
the achievement by the company of a minimum level of earnings per share over
the four-year period. An amount equal to the cash dividends per share paid
on the company's common stock during the four-year period shall accrue with
respect to each share of restricted stock and be payable at the end of the
four-year period. The restricted stock will be forfeited upon termination of
employment during the four-year period for any reason other than retirement,
death or disability.
(2) Restricted stock will vest on December 31, 2003.
EMPLOYEE BENEFIT PLANS
WHAT EMPLOYEE BENEFIT PLANS HAS THE COMPANY ESTABLISHED?
Salary Continuation Plan. The company has a Salary Continuation Plan which
provides for the payment for ten years following the retirement or death of the
participant of an amount which, on an actuarial basis as computed in 1987, was
expected to equal the difference between 55% of the participant's then
9
<PAGE> 12
projected compensation at age 60 and the sum of then projected Social Security
and company pension plan retirement benefits to which the participant is
entitled. If the participant dies prior to retirement, the benefits are payable
to the participant's beneficiary. Compensation for purposes of the Salary
Continuation Plan generally includes salary plus cash received and deferred
compensation accrued under the company's Management Incentive Plan and the
former Salaried Employees' Profit Sharing Plan and company contributions under
the Employee Stock Purchase Plan. The company has purchased insurance on the
lives of the participants to provide funds to help offset the costs of benefits
payable under the plan. Mr. Norris is the only active employee who participates
in the plan.
Pension Plan. Officers and directors who are full time employees of the
company participate in the P. H. Glatfelter Company Retirement Plan for Salaried
Employees (the pension plan). Benefits payable under the pension plan are based
upon years of service and average annual compensation for the five consecutive
calendar years during the ten years preceding the year of retirement that yield
the highest average. Retirement benefits under the pension plan are not subject
to any deduction for Social Security benefits. Retirement benefits accrued under
the pension plan for employees of the Ecusta Division are reduced by any pension
benefits payable under a pension plan maintained by a predecessor employer.
Annual compensation for purposes of the pension plan generally includes salary
as listed in the Summary Compensation Table on page 7 (compensation table) plus
bonus listed in the compensation table for the prior year. To the extent
deferral of an award under the company's Management Incentive Plan causes a
reduction in a participant's pension under the pension plan, a pension
supplement (the MIP adjustment supplement) will be paid from the company's
Supplemental Management Pension Plan.
Employees of the Spring Grove mill who earned a vested benefit under the
pension plan before May 1, 1970 (grandfathered Spring Grove participants) may
receive a benefit, if greater than the usual benefit, which does not give effect
to years of service and is based on a percentage of the participant's earnings
as defined in the plan for this purpose, which consist of the sum of (i) the
participant's annual base salary as of the April 30th (or other effective date
for annual compensation adjustments) closest to the retirement date or, if
earlier, the April 30th (or other effective date for annual compensation
adjustments) closest to the participant's 60th birthday and (ii) the
participant's average compensation in excess of annual base salary for the five
year period prior to the year of actual retirement, or, if earlier, the year in
which the employee attains age 60. Annual compensation for such participants
generally means the salary and bonus amounts listed in the compensation table.
The pension plan has been amended to reflect three voluntary early
retirement enhancement programs (the VEREPs) effective in 1998, 1999 and 2000
for eligible salaried employees of the company. Eligible employees who have
elected to participate in one of the VEREPs generally receive enhanced benefits
under the pension plan based on the addition of five years of credited service
and five years of additional age, but not beyond age 65.
Supplemental Executive Retirement Plan. The company has a Supplemental
Executive Retirement Plan (the SERP) consisting of two benefits, either or both
of which are available to those management and executive employees who have been
selected by the company's Compensation Committee for participation therein. The
first benefit, known as the restoration pension, provides an additional pension
benefit based on the participant's pension benefit earned under the terms of the
pension plan, which is intended to restore that portion of the pension plan's
benefit which cannot be paid from that plan due to legal limitations on the
compensation and total benefits payable thereunder. Participants may receive the
restoration pension in a single sum or in any form permitted under the pension
plan, as elected by the participant at the time he first becomes a participant.
The second benefit, known as the FAC pension, pays a monthly pension
benefit equal to a designated percentage of the participant's final average
compensation (as defined below), offset by the actuarially equivalent value of
the participant's benefits under the pension plan and certain company-sponsored
10
<PAGE> 13
nonqualified defined benefit pension arrangements, including (if applicable) the
restoration pension. The designated percentage is 2% multiplied by the
participant's years of credited service under the pension plan, but not in
excess of 55%. The FAC pension is payable following the participant's retirement
at or after age 62 in the form of a joint and 75% survivor annuity with the
participant's spouse or, if so requested by the participant and approved by the
company's Compensation Committee, as a single sum. The FAC pension can also be
paid on an early retirement basis as early as age 55, but reduced by 2.5% for
each year by which the early benefit commencement precedes the participant's
attainment of age 62. A survivor benefit is also payable to the participant's
surviving spouse if the participant dies before his benefit commencement date.
Final average compensation means the annualized average of the participant's
eligible compensation for the sixty (60) calendar months immediately preceding
his retirement, which generally means the salary and bonus amounts listed in the
compensation table.
WHAT ARE THE ESTIMATED ANNUAL RETIREMENT BENEFITS OF THE COMPANY'S EXECUTIVES?
The following table shows the estimated annual retirement benefits, payable
in the form of a joint and 75% survivor annuity beginning at age 62, to those
executives, including Messrs. Glatfelter II, Newcomer and Lawrence, who are
eligible for the FAC pension under the SERP. This benefit consists of the sum of
the executive's pension plan benefits and the additional amount necessary to
yield the benefit calculated under the FAC pension.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT
AVERAGE ANNUAL BENEFIT BASED ON YEARS OF SERVICE(1)
FIVE YEAR PLAN ---------------------------------------------
COMPENSATION($) 15 20 25 27.5 OR MORE
--------------- ------- ------- ------- ------------
<S> <C> <C> <C> <C>
125,000....................... 37,500 50,000 62,500 68,750
150,000....................... 45,000 60,000 75,000 82,500
175,000....................... 52,500 70,000 87,500 96,250
200,000....................... 60,000 80,000 100,000 110,000
250,000....................... 75,000 100,000 125,000 137,500
300,000....................... 90,000 120,000 150,000 165,000
400,000....................... 120,000 160,000 200,000 220,000
500,000....................... 150,000 200,000 250,000 275,000
600,000....................... 180,000 240,000 300,000 330,000
700,000....................... 210,000 280,000 350,000 385,000
800,000....................... 240,000 320,000 400,000 440,000
900,000....................... 270,000 360,000 450,000 495,000
</TABLE>
- ---------------
(1) Pension benefit paid as a joint and 75% survivor annuity.
The following executive officers who participate in the pension plan had
the indicated credited years of service at December 31, 1999: G. H. Glatfelter
II: 23 years; T. C. Norris: 40 years; R. P. Newcomer: 27 years; R. S. Lawrence:
39 years; and L. R. Hall: 40 years.
The foregoing table assumes that the executive is a participant in the FAC
pension under the SERP. Of the named executive officers at December 31, 1999,
Mr. Norris and Mr. Hall are not eligible for the FAC pension and therefore
receive a pension determined under the pension plan, together with, as
applicable, the restoration pension and the MIP adjustment supplement.
The accrued annual benefits for Mr. Norris and Mr. Hall under the pension
plan, the restoration pension and the MIP adjustment supplement are $258,348 and
$80,127, respectively. These accrued benefits are payable in the form of a
single life annuity beginning at age 65. As noted above, Mr. Norris also
participates in the Company's Salary Continuation Plan. Each of Mr. Norris and
Mr. Hall also is eligible to receive a 3-year early retirement supplement (under
the company's Supplemental Management Pension Plan) which is paid if
11
<PAGE> 14
he retires before attaining age 65 and elects to defer receipt of benefits under
the pension plan until age 65 or, if earlier, until the first day of the 36th
month following his retirement. This benefit pays, for up to three years, a
monthly benefit equal to that calculated under the pension plan and (if
applicable) the restoration pension under the SERP, but with the addition of up
to three years to his age.
COMPENSATION COMMITTEE INTERLOCK
AND INSIDER PARTICIPATION
The Compensation Committee consists of five members of the Board of
Directors: P. R. Roedel (Chairman), R. E. Chappell, N. DeBenedictis, R. S.
Hillas and R. L. Smoot.
REPORT OF COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
WHAT ARE THE RESPONSIBILITIES OF THE COMPANY'S COMPENSATION COMMITTEE?
The Compensation Committee reviews and approves the elements of the
company's executive compensation program and assesses the effectiveness of the
program as a whole. The Compensation Committee's responsibilities include: (i)
reviewing annually (A) with the company's chief executive officer the job
performance of corporate officers and key senior management employees of the
company and (B) the job performance of the company's chief executive officer as
measured against financial and other objectives and the company's achievements
as compared to certain other companies in the paper and forest products
industry, (ii) reviewing and establishing the level of salaries and benefits for
the chief executive officer, other corporate officers and other key senior
management employees of the company, including but not limited to benefits under
the company's long-term incentive plan, profit sharing plans, defined benefit
and contribution plans and other welfare benefit plans, and (iii) reviewing and
approving the participants in, and the operating rules for awards under, the
company's Management Incentive Plan.
The Compensation Committee from time to time reviews the company's entire
executive compensation structure through an examination of compensation
information for comparable companies and certain broader-based data, including
data relating to the geographic areas in which the company has facilities,
compiled by the company and by compensation and other consulting firms. As used
herein, comparable companies refer to other companies in the paper and forest
products industry (both publicly and privately owned) selected by the company's
compensation consultant and approved by management, which on an overall basis
are most similar to the company in relation to size, products and financial and
other characteristics and in certain cases to general industry and nondurable
manufacturing companies of roughly the same revenue size as the company. The
companies that comprise the Peer Group in the Stock Performance Chart below are
the company's industry-based comparable companies. Certain of the comparable
companies are included in the S&P 500, and therefore are represented in two
indices in the Stock Performance Chart. In examining the compensation paid by
the comparable companies, the Compensation Committee does not analyze the stock
performance of such companies, but does examine their general financial
performance.
WHAT IS THE COMPANY'S PHILOSOPHY REGARDING EXECUTIVE OFFICER COMPENSATION?
The Compensation Committee has generally structured the company's executive
compensation program (i) to be competitive with compensation programs of
comparable companies to enable the company to attract, retain and motivate a
highly qualified executive management team, (ii) to provide a significant
portion of variable-based compensation that is contingent upon
objectively-measured performance to align executive officers' interests with
those of the company's shareholders, and (iii) to include appropriate and
flexible design features in such programs which will be responsive to the
peculiarities of the paper industry and to the
12
<PAGE> 15
changing needs of the company. The elements of the company's executive
compensation program are salary, profit sharing, annual incentive compensation,
long-term incentive compensation and other benefits. From time to time the
Compensation Committee solicits the advice of compensation and other consulting
firms to evaluate the company's executive compensation program in order to
ensure that such program is competitive with compensation programs of comparable
companies.
WHAT ARE THE COMPONENTS OF EXECUTIVE COMPENSATION?
Salary. The company's policy is to pay fair salaries at levels which are
sufficient to attract and retain high caliber individuals based on the relative
value of each position, as measured against comparable companies. The
Compensation Committee assigns each executive position a salary grade with a
salary range based on the salary level for similar positions at comparable
companies. Ranges are adjusted by the Compensation Committee periodically and
executives are moved to different salary grades as their job responsibilities or
titles change.
Generally, executive officer salaries are reviewed and approved annually.
The salary for each executive is set by the Compensation Committee after an
assessment of his or her performance and the relation of his or her salary to
the midpoint for the relevant salary range, as well as the company's financial
results and general economic conditions. The factors that were considered in
granting salary increases to executive officers for 1999 were as follows: (i)
the company's financial performance in 1998 relative to other paper companies,
(ii) the salary levels for certain of the executive officers were below the
minimum salary levels of the salary grades for their respective positions and
the salary levels for positions of similar scope and responsibility at
comparable companies and (iii) the Compensation Committee's assessment of the
executive officer's performance as evaluated and reported to the Compensation
Committee by the chief executive officer.
Annual Incentive Compensation. The company has established a profit
sharing plan which covers all of its domestic salaried employees. The plan is
intended to incentivize participants to enhance company performance by offering
them a shared interest in profits each year, up to a maximum of 15% of base
salary.
The Compensation Committee establishes additional incentive bonus
opportunities under its Management Incentive Plan, which are designed to
encourage greater efforts on the part of key salaried employees to increase the
profits of the company. The incentive bonus opportunities potentially represent
a significant portion of total compensation and are intended to correlate with
the financial performance of the company or one or more divisions thereof. The
underlying objectives of the company's Management Incentive Plan are to assure
that incentive bonus awards are at risk annually, to reward senior executives on
the basis of corporate financial results and key mill management personnel on
the basis of mill financial results and to provide an incentive bonus award
structure for key salaried employees of the company that is similar to that of
comparable companies.
To establish financial targets for payment of profit sharing and incentive
awards for 1999, the Committee established separate profit centers for the
company's Global operations, the U.S. Corporate operations, the Glatfelter Paper
Group (representing a combination of the Spring Grove and Neenah mills) and for
each of its domestic mills. The company's senior executives were participants in
the Global and Glatfelter Paper Group profit centers in 1999.
The operating rules established by the Compensation Committee for profit
sharing in 1999 provide for awards of up to 15% of base salary depending on the
percentage return on shareholders' equity for the operations included in the
profit center or, in the case of the domestic mill profit centers, on the
individual mill financial performance for the year.
Under the operating rules established by the Compensation Committee for the
Management Incentive Plan for 1999, the incentive bonus awards for the Global
and U.S. Corporate profit centers were based on the
13
<PAGE> 16
earnings per share of the company. The incentive bonus award for all other
profit centers was based on the return on capital employed for each profit
center and on the earnings per share of the company.
The Compensation Committee establishes annual maximum, target and minimum
financial objectives to be achieved for each profit center. Under the plan, when
establishing such financial objectives, the Compensation Committee considers the
current economic climate, the forecast for the company's business and the
historical financial results of the company. This methodology is intended to
induce management to enhance the profitability of the company throughout the
full business cycle, and therefore to provide value to the shareholders of the
company. The Compensation Committee believes that executive officers should not
receive any incentive bonus if the company does not achieve annually established
minimum financial objectives. If the minimum financial objectives are achieved,
the incentive award for an executive officer would be determined by multiplying
a percentage derived from the financial performance of such executive officer's
respective profit center by the midpoint of the salary range for such officer's
salary grade.
The 1999 financial performance of the company's profit centers in which
senior executives are participants resulted in profit sharing awards of one-half
or less of the maximum award attainable under the plan.
For purposes of the Management Incentive Plan, the financial performances
of the Global and Glatfelter Paper Group profit centers for 1999 were modestly
less than the target financial objectives established by the Compensation
Committee. The incentive bonus payments were higher in 1999 than in 1998 because
the company's financial performance was greater than budget and, accordingly,
closer to the target financial performance established by the Compensation
Committee for 1999 than in 1998. In addition, certain senior executives were
promoted into higher salary grades during 1998 commensurate with increased
responsibilities, so their incentive bonuses for 1999 were based on salary
grades with higher salary range midpoints than for 1998.
Long-Term Incentive Compensation. The company's Long-Term Incentive Plan
enables the company to offer key employees equity interests in the company and
other incentive awards, including performance-based stock incentives. Certain
features of the plan (i.e., stock options, performance shares, performance units
and restricted stock) are similar to long-term incentives offered by many of the
comparable companies. The primary purposes of the plan are to (i) attract,
retain, motivate and reward key employees, (ii) provide target long-term
incentive award opportunities which are competitive with comparable companies,
(iii) assure that the awards issued pursuant to the plan reflect the cyclical
and long-term nature of the paper industry, (iv) enable senior executives to
acquire appropriate levels of equity interest in the company in order to
increase the alignment of their interests with those of shareholders and (v)
otherwise strengthen the mutuality of interests between key employees and the
company's shareholders.
In 1995, the company adopted a long-term incentive program, developed at
the direction of the Compensation Committee by an executive compensation
consulting firm, under which stock options and/or performance shares were
granted annually through January 1998 to key employees. The value of such awards
were based upon the value of awards granted to positions of similar scope and
responsibility within comparable companies. Stock options have an exercise price
equal to the fair market value of the company's common stock at the time of the
grant and generally become exercisable in annual 25% increments commencing one
year after the date of grant. Contingent awards of performance shares were
generally made on the first day of a four-year performance period. At the end of
the four-year performance period, the number of shares earned is based upon the
level of achievement of two factors: return on average shareholders' equity and
pre-tax earnings relative performance. If the threshold return on average
shareholders' equity is not attained, no shares are earned. Above the threshold
goals, the contingent award is reduced if the target goals are not met and such
contingent award is supplemented if the target goals are exceeded. Payouts of
earned performance shares are made at the discretion of the Committee in cash or
in common stock of the company at the end of the four-year performance period.
The second four-year performance period under the long-term incentive program
14
<PAGE> 17
ended on December 31, 1999. The payouts were moderately above the target
amounts, but were below the maximum amounts, which could have been earned for
such period.
In December 1998, the Compensation Committee revised the long-term
incentive program by making awards of restricted stock in lieu of awards of
performance shares. The grant of stock options continued. In addition, the
grants and awards were made effective in December, whereas in prior years such
grants and awards were approved in December, but made effective on January 1 of
the following year. Restricted stock was substituted by the Committee for
performance shares because the Committee viewed restricted stock, subject to
future vesting, as simpler, more understandable and better serving the objective
of retaining key senior executives. Stock options continue to provide the
necessary long-term incentive. In December 1999, the Compensation Committee made
additional stock option grants and restricted stock awards consistent with the
program instituted in December 1998. The value of the stock option grants and
restricted stock awards made in December 1999 was based upon the value of awards
granted to positions of similar scope and responsibility within comparable
companies. The stock options that were granted in December 1999 had terms and
conditions similar to the stock options granted effective on January 1, 1998 and
in December 1998. Certain executive officers were also granted restricted stock
awards in December 1999 which, similar to the restricted stock awards made in
December 1998, are subject to the continued service of such executive officers
for four years, except in cases of death, disability or retirement, and
achievement of a threshold earnings level established by the Committee.
HOW IS THE COMPANY ADDRESSING INTERNAL REVENUE CODE LIMITS ON DEDUCTIBILITY OF
COMPENSATION?
The Compensation Committee intends that awards made under the Long-Term
Incentive Plan and the Management Incentive Plan will qualify as
performance-based compensation that will be deductible for federal income tax
purposes under Section 162(m) of the Internal Revenue Code.
HOW IS THE COMPANY'S CHIEF EXECUTIVE OFFICER COMPENSATED?
The salary of George H. Glatfelter II, president and chief executive
officer of the company, was increased by 25% effective January 1, 1999, which
moved him above the minimum but well below the mid-point for his salary grade.
In approving this increase the Committee also considered Mr. Glatfelter's role
in guiding the company since he became its chief executive in June 1998. This
was a particularly challenging period of unfavorable business conditions in both
the foreign and domestic paper markets in which the company's financial
performance was favorable when compared to many others in the paper industry.
Mr. Glatfelter's annual incentive bonus award for 1999 reflected the fact
that the financial performance of the company's Global profit center for 1999
was modestly less than the target financial objectives established by the
Compensation Committee. Mr. Glatfelter's incentive bonus payment was higher in
1999 than in 1998 because the company's financial performance was greater than
budget and, accordingly, closer to the target financial performance established
by the Compensation Committee for 1999. In addition, because Mr. Glatfelter was
elected as chief executive officer and promoted to a higher salary grade in
mid-1998, his incentive bonus for 1998 was based on the midpoint of the salary
range for his salary grade at the beginning of 1998, which was lower than the
salary range midpoint for his salary grade in 1999.
The Committee also granted Mr. Glatfelter nonqualified stock options under
the Long-Term Incentive Plan effective December 14, 1999 with a value intended
to approximate 50% of long-term incentive compensation granted to chief
executive officers of comparable companies. The remaining 50% consisted of an
award of restricted stock by the Compensation Committee vesting December 31,
2003, subject to the achievement of a minimum net income level over the
four-year vesting period. The Committee believes that
15
<PAGE> 18
this form of stock compensation more closely aligns Mr. Glatfelter's interests
with those of the shareholders of the company.
P. R. Roedel, Chairman
R. E. Chappell
N. DeBenedictis
R. S. Hillas
R. L. Smoot
STOCK PERFORMANCE CHART
The following chart compares the yearly percentage change in the cumulative
total return on the company's common stock during the five years ended December
31, 1999 with the cumulative total return on the S&P 500 Index, the S&P MidCap
400 Index and the company's Peer Group(1). This year the company has included
the S&P MidCap 400 Index, in addition to the S&P 500 Index, in the Stock
Performance Chart because the S&P 500 Index includes only very large companies
that are not comparable in size to the company. The companies comprising the S&P
MidCap 400 Index are more closely related to the company in terms of size. The
comparison assumes $100 was invested on December 31, 1994 in the company's
common stock and in each of the foregoing indices and assumes reinvestment of
dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
FOR THE YEAR ENDED DECEMBER 31, 1999
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
P. H. GLATFELTER
COMPANY S&P 500 S&P MIDCAP 400 PEER GROUP
---------------- ------- -------------- ----------
<S> <C> <C> <C> <C>
1994 100.00 100.00 100.00 100.00
1995 114.73 137.58 130.94 115.20
1996 125.43 169.17 156.08 126.43
1997 135.05 225.60 206.43 133.67
1998 93.87 290.08 245.86 130.11
1999 116.49 351.12 282.06 167.08
</TABLE>
- ---------------
(1) The company's Peer Group consists of companies in the same industry as the
company. The returns of each company in the Peer Group have been weighted
according to their respective stock market capitalization for purposes of
arriving at the Peer Group average. The members of the Peer Group are as
16
<PAGE> 19
follows: Bowater, Inc., Chesapeake Corporation, Consolidated Papers Inc., Mead
Corporation, Pope and Talbot, Inc., Potlatch Corporation, Schweitzer-Mauduit
International, Inc., Wausau Mosinee Paper Mills Corporation, Westvaco
Corporation and Willamette Industries.
CERTAIN TRANSACTIONS
Mr. Smoot, a director of the company, is president and chief executive
officer of PNC Bank, National Association, Philadelphia/South Jersey markets.
PNC Bank, National Association (PNC Bank), an indirect subsidiary of PNC Bank
Corp., has a banking relationship with the company and provides general banking
services and credit facilities. As of December 31, 1999, the company had a
$25,000,000 line of credit with PNC Bank. During 1999, the PNC Bank line of
credit was not used. In addition, PNC Bank is one of seven lending institutions
under a $200,000,000 Credit Agreement dated December 22, 1997, which was used to
finance the company's acquisition of the Schoeller & Hoesch specialty paper
business. PNC Bank's committed share of this credit facility is $31,250,000. As
of December 31, 1999, the company's borrowing under the Credit Agreement was
approximately $145,600,000; PNC Bank's portion of this loan was approximately
$22,750,000. All transactions between the company and PNC Bank have been made in
the ordinary course of business and on substantially the same terms as those
prevailing at the time for comparable transactions with other persons.
OWNERSHIP OF COMMON STOCK
The following table sets forth as of March 1, 2000 (except as otherwise
noted) the holdings of (i) each person who is known by the company to own
beneficially more than 5% of the common stock of the company, (ii) each
director, each director nominee and certain executive officers and (iii) all
directors and executive officers of the company as a group. All stock with
respect to which a person has the right to acquire beneficial ownership within
60 days is considered beneficially owned by that person.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
(NUMBER OF SHARES) PERCENTAGE
-------------------------------- OF CLASS
VOTING AND/OR (IF GREATER
NAME DIRECT(1) INVESTMENT POWER(2) THAN 1%)
---- --------- ------------------- -----------
<S> <C> <C> <C>
Principal Holders
PNC Bank Corp...................................... 0 16,321,007(3) 38.5%
Fifth Ave. & Wood St.
Pittsburgh, Pa.
P. H. Glatfelter Family............................ 0 13,505,392(4) 32.0%
Shareholders' Voting Trust
c/o PNC Bank
1600 Market Street
Philadelphia, Pa.
G. H. Glatfelter................................... 0 3,785,819(5) 9.0%
Spring Grove, Pa.
Directors, nominees for director and certain officers
(other than those listed above)
R. E. Chappell..................................... 0 3,500(6) --
N. DeBenedictis.................................... 2,000 2,500(6) --
P. G. Foulkrod..................................... 0 1,890,868(7) 4.5%
G. H. Glatfelter II................................ 1,865 94,287(8) --
L. R. Hall......................................... 3,008 48,198(9) --
R. S. Hillas....................................... 0 17,500(6) --
M. A. Johnson II................................... 10,544 3,036(6) --
</TABLE>
17
<PAGE> 20
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
(NUMBER OF SHARES) PERCENTAGE
-------------------------------- OF CLASS
VOTING AND/OR (IF GREATER
NAME DIRECT(1) INVESTMENT POWER(2) THAN 1%)
---- --------- ------------------- -----------
<S> <C> <C> <C>
R. S. Lawrence..................................... 6,271 65,888(10) --
R. P. Newcomer..................................... 7,529 85,629(11) --
T. C. Norris....................................... 95,923 351,992(12) --
P. R. Roedel....................................... 200 1,500(6) --
J. M. Sanzo........................................ 500 1,500(6) --
R. L. Smoot........................................ 500 1,500(6) --
All directors and executive officers as a group.... 132,845 6,501,649(13) 15.6%
</TABLE>
- ---------------
(1) Reported in this column are shares held of record.
(2) Does not include shares reported in Direct Ownership column. For purposes
of the table, shares of common stock are considered beneficially owned by a
person if such person has or shares voting or investment power with respect
to such stock. As a result, the same security may be beneficially owned by
more than one person and, accordingly, in some cases, the same shares are
listed opposite more than one name in the table. Also includes, in some
cases, shares beneficially held by spouses or minor children, as to which
beneficial ownership is disclaimed.
(3) Consists of 9,197,872 shares as to which PNC Bank Corp. has sole voting
power; 7,023,269 shares as to which PNC Bank Corp. has shared voting power;
10,182,710 shares as to which PNC Bank Corp. has sole investment power; and
5,831,730 shares as to which PNC Bank Corp. has shared investment power.
The amounts specified for shared voting power and shared investment power
both include 89,348 shares held by PNC Bank as co-trustee with G. H.
Glatfelter, 990,835 shares held by PNC Bank as co-trustee or co-fiduciary
with P. G. Foulkrod and 5,682 shares held by PNC Bank as co-trustee with G.
H. Glatfelter II. In addition, 13,505,392 shares of the total amount of
shares beneficially held by PNC Bank Corp. are deposited in the voting
trust (see footnotes (4) and (7)). All shares beneficially held by PNC Bank
Corp. are also considered to be beneficially held by its subsidiary, PNC
Bancorp, Inc., and by PNC Bank, a subsidiary of PNC Bancorp, Inc. All of
the above share amounts are as of December 31, 1999.
(4) Consists of shares beneficially owned as of December 31, 1999 by certain
descendants of Philip H. Glatfelter or the spouses of such descendants,
including shares beneficially owned by P. G. Foulkrod, G. H. Glatfelter and
G. H. Glatfelter II, which were deposited in the P. H. Glatfelter Family
Shareholders' Voting Trust dated July 1, 1993 (the voting trust). Shares
deposited in the voting trust may be withdrawn subject to certain
conditions. Co-trustees for the voting trust are William M. Eyster II,
Katherine G. Costello, Elizabeth Glatfelter, Phillip H. Glatfelter IV, H.
Clinton Vaughan and PNC Bank. Co-trustees other than PNC Bank each
represent a family group. The shares deposited in the voting trust may be
voted only in accordance with a majority of votes cast by the co-trustees
pursuant to a weighted formula in which (i) each co-trustee (other than PNC
Bank) is entitled to cast such number of votes as is equal to the number of
shares deposited in the voting trust in which members of his or her family
group have an interest and (ii) PNC Bank is entitled to cast such number of
votes as is equal to the number of shares deposited in the voting trust in
which any fiduciary trust of which PNC Bank is a trustee and which is for
the benefit of one or more Glatfelter family members has an interest. The
co-trustees have no dispositive power with regard to the shares deposited
in the voting trust. The voting trust will continue until it is terminated
by the co-trustees or all of the shares deposited in the voting trust are
withdrawn. The address for each of the co-trustees is c/o PNC Bank, 1600
Market Street, Philadelphia, Pa.
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<PAGE> 21
(5) Includes 1,500 shares subject to the currently exercisable portions of
options as well as 89,348 shares held as co-trustee with PNC Bank, 901,161
shares (of which 4,416 shares are also included in the number of shares
which he holds as co-trustee) which G. H. Glatfelter has the right to
withdraw from certain trusts of which PNC Bank is trustee and 2,793,810
shares which G. H. Glatfelter has the right, on certain conditions, to
purchase from certain trusts of which PNC Bank is trustee. Except for the
1,500 shares subject to currently exercisable options and 2,306,178 shares
which he has the right to purchase, all shares beneficially owned by G. H.
Glatfelter are deposited in the voting trust (see footnote (4)). Does not
include an additional 1,500 shares subject to options which will become
exercisable on May 1, 2000.
(6) Includes 1,500 shares subject to the currently exercisable portions of
options. Does not include an additional 1,500 shares subject to options
which will become exercisable on May 1, 2000.
(7) Includes 1,000 shares held in a retirement plan of which P. G. Foulkrod's
husband is the trustee, 990,835 shares held as co-trustee and 899,033
shares which P. G. Foulkrod has the right to withdraw from a trust of which
PNC Bank is trustee. Except for the 1,000 shares held in the retirement
plan, all shares beneficially owned by P. G. Foulkrod are deposited in the
voting trust (see footnote (4)). Does not include an additional 1,500
shares subject to options which will become exercisable on May 1, 2000.
(8) Includes 87,359 shares subject to the currently exercisable portions of
options. Of the shares beneficially owned by G. H. Glatfelter II, 5,898 are
held as co-trustee with PNC Bank and are subject to the voting trust (see
footnote (4)).
(9) Includes 46,174 shares subject to the currently exercisable portions of
options.
(10) Includes 63,084 shares subject to the currently exercisable portions of
options.
(11) Includes 82,390 shares subject to the currently exercisable portions of
options.
(12) Includes 345,000 shares subject to the currently exercisable portions of
options.
(13) Includes 773,903 shares subject to currently exercisable portions of
options.
G. H. Glatfelter, the voting trust, PNC Bank Corp., PNC Bancorp, Inc. and
PNC Bank may be deemed to be "control persons" of the company for purposes of
the proxy rules and regulations of the Securities and Exchange Commission.
19
<PAGE> 22
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
On May 1, 1998, a restricted stock award of 20,000 shares of the company's
common stock vested and was paid to Thomas C. Norris. Mr. Norris did not file a
Form 4 to report the vesting and payment of this restricted stock award until
May 21, 1999.
SHAREHOLDER PROPOSALS
The company has been notified that the following shareholders intend to
present the proposals set forth below for consideration at the annual meeting.
SHAREHOLDER PROPOSAL 1 -- ELIMINATE CLASSIFIED BOARD OF DIRECTORS
Mr. William Steiner, having an office address 4 Radcliff Drive, Great Neck,
New York 11024, beneficial owner of 1,950 shares of common stock, has proposed
the adoption of the following resolution and has furnished the following
statement in support of his proposal:
"RESOLVED, that the stockholders of the Company request that the Board of
Directors take the necessary steps, in accordance with state law, to declassify
the Board of Directors so that all directors are elected annually, such
declassification to be effected in a manner that does not affect the unexpired
terms of directors previously elected.
"SUPPORTING STATEMENT
"The election of directors is the primary avenue for stockholders to
influence corporate governance policies and to hold management accountable for
its implementation of those policies. I believe that the classification of the
Board of Directors, which results in only a portion of the Board being elected
annually, is not in the best interests of the Company and its stockholders.
"I believe that the Company's classified Board of Directors maintains the
incumbency of the current Board and therefore of current management, which in
turn limits management's accountability to stockholders.
"The elimination of the Company's classified Board would require each new
director to stand for election annually and allow stockholders an opportunity to
register their views on the performance of the Board collectively and each
director individually. I believe this is one of the best methods available to
stockholders to insure that the Company will be managed in a manner that is in
the best interests of the stockholders.
"I believe that concerns expressed by companies with classified boards that
the annual election of all directors could leave companies without experienced
directors in the event that all incumbents are voted out by stockholders, are
unfounded. In my view, in the unlikely event that stockholders vote to replace
all directors, this decision would express stockholder dissatisfaction with the
incumbent directors and reflect the need for change.
"I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION"
WHAT IS THE BOARD'S RESPONSE TO PROPOSAL 1?
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS PROPOSAL
FOR THE FOLLOWING REASONS:
The company's Board of Directors has been divided into three classes,
serving staggered three-year terms, for many years. The Board continues to
believe that the election of directors by classes is in the best interests
of the company and its shareholders and should not be changed.
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<PAGE> 23
The Board rejects the notion that directors elected every three years
are less accountable to the shareholders than directors elected annually.
Each director is subject to the same standard of performance and
responsibility to shareholders regardless of the length of the director's
term of office. In addition, a classified board provides at least two
principal benefits to the company.
First, the election of directors by classes allows continuity and
consistency of business strategy and policy and permits the company to
implement a long-term strategy and to focus on long-term performance, all
with a goal of enhancing shareholder value. A classified board helps ensure
that a majority of the directors at any given time have prior experience as
directors of the company and are knowledgeable about its business and
affairs. At the same time, through the annual election of one-third of the
Board, the shareholders have an opportunity each year to review the
effectiveness of the Board and to make changes in the composition of the
Board without wholesale and disruptive changes at one time.
Secondly, when directors are divided into three classes, a change in
the composition of a majority of the Board normally requires at least two
shareholder meetings, instead of one. Therefore, the Board believes that
the election of directors by classes reduces the vulnerability of the
company to potentially hostile and abusive takeover tactics and encourages
potential acquirors to initiate arm's-length negotiations with both
management and experienced directors. While a classified Board does not
preclude unsolicited acquisition proposals, it does help eliminate the
threat of imminent removal and better positions the incumbent Board to act
to maximize the value of an appropriate acquisition to all shareholders and
other constituents.
Even if this proposal is approved by the shareholders, it will only
represent an expression of the wishes of the shareholders and will not be
binding on the Board of Directors. The Board would still be required to
determine whether a change in the present system of electing directors is
in the best interests of the company and could decide, in the exercise of
its business judgment, to retain the existing classified Board.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THIS
SHAREHOLDER PROPOSAL AND YOUR PROXY WILL BE SO VOTED IF THE PROPOSAL IS
PRESENTED UNLESS YOU SPECIFY OTHERWISE.
SHAREHOLDER PROPOSAL 2 -- MAXIMIZE VALUE
Mr. Charles Miller, having an office address at 23 Park Circle, Great Neck,
New York 11024, beneficial owner of 500 shares of common stock, has proposed the
adoption of the following resolution and has furnished the following statement
in support of his proposal:
"Resolved that the shareholders of P. H. Glatfelter Company Corporation
urge the P. H. Glatfelter Company Board of Directors to arrange for the prompt
sale of P. H. Glatfelter Company to the highest bidder.
"The purpose of the Maximize Value Resolution is to give all P. H.
Glatfelter Company shareholders the opportunity to send a message to the P. H.
Glatfelter Company Board that they support the prompt sale of P. H. Glatfelter
Company to the highest bidder. A strong and or majority vote by the shareholders
would indicate to the board the displeasure felt by the shareholders of the
shareholder returns over many years and the drastic action that should be taken.
Even if it is approved by the majority of the P. H. Glatfelter Company shares
represented and entitled to vote at the annual meeting, the Maximize Value
Resolution will not be binding on the P. H. Glatfelter Company Board. The
proponent however believes that if this resolution receives substantial support
from the shareholders, the board may choose to carry out the request set forth
in the resolution.
"The prompt auction of P. H. Glatfelter Company should be accomplished by
any appropriate process the board chooses to adopt including a sale to the
highest bidder whether in cash, stock, or a combination of both. It is expected
that the board will uphold its fiduciary duties to the utmost during the
process.
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<PAGE> 24
"The proponent further believes that if the resolution is adopted, the
management and the board will interpret such adoption as a message from the
company's stockholders that it is no longer acceptable for the board to continue
with its current management plan and strategies.
"I URGE YOUR SUPPORT, VOTE FOR THIS RESOLUTION"
WHAT IS THE BOARD'S RESPONSE TO PROPOSAL 2?
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE AGAINST THIS PROPOSAL
FOR THE FOLLOWING REASONS:
The Board takes its responsibilities to the company and its various
constituencies very seriously. In that regard, the Board is intensely
focused on maximizing the value of a shareholder's investment in the
company. The Board is committed to enhancing value over the long term as
opposed to a short-term result. The Board strongly disagrees with the
proposition that a prompt auction of the company resulting in a sale to the
highest bidder would maximize value to its shareholders. The Board's belief
had the support of the overwhelming majority of the shareholders who voted
against an identical proposal submitted to the company for its 1998 Annual
Meeting.
The Board and management continue to seek to maximize shareholder
value through several initiatives. The company is undertaking an extensive
review of its business in order to refine its vision and strategy and
develop the action steps required for implementation. This review, which
includes the aid of an outside consultant, represents the most
comprehensive strategic planning effort in the history of the company. Our
new vision and strategy will be fully in place later this year.
Our strategy will include an emphasis on customer focus, the
acceleration of new product development, redeployment of certain of our
assets and a number of supply chain management initiatives that will have
direct impact on financial performance. The company will emphasize its
higher value-added, technically engineered products and exit some of its
lower-margin, less efficient businesses. A recent example of implementing
this strategy is the December 1999 announcement of a capacity reduction for
certain of the company's less profitable tobacco papers. While reducing
sales revenues, this action was designed to enhance long-term profitability
and, ultimately, the return to shareholders.
The company will also employ a disciplined approach to growth through
strategic alliances, joint ventures and/or acquisitions. The acquisition of
the Schoeller & Hoesch group (S&H) in 1998 illustrates the success of this
strategy. S&H made important contributions to the company's earnings in
both 1998 and 1999. The company will evaluate attractive acquisition
opportunities which have the potential to meet the return on capital
hurdles established for the company.
A sale of the company at this time would foreclose the full
opportunity for the company and its shareholders to benefit from the
strategic initiatives which the company is developing and is in the process
of implementing.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE ADOPTION OF THIS
SHAREHOLDER PROPOSAL AND YOUR PROXY WILL BE SO VOTED IF THE PROPOSAL IS
PRESENTED UNLESS YOU SPECIFY OTHERWISE.
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<PAGE> 25
OTHER BUSINESS
As of the date of this proxy statement, the Board of Directors knows of no
business that will be presented for consideration at the annual meeting other
than the items referred to above. If any other matter is properly brought before
the meeting for action by shareholders, which under applicable proxy regulations
need not be included in this proxy statement or which the Board did not know
would be presented a reasonable time before this solicitation, the persons named
in the accompanying proxy will have discretionary authority to vote proxies with
respect to such matter in accordance with their best judgment.
/s/ M.R. MUELLER
M. R. MUELLER,
Secretary
March 24, 2000
23
<PAGE> 26
[RECYCLE LOGO]
Printed on Ecusta Sparlite
Manufactured by the Ecusta Division of the
P. H. Glatfelter Company
Basis 25x38 -- 37 lb. Recycled.
<PAGE> 27
PROXY
P. H. GLATFELTER COMPANY
SPRING GROVE, PENNSYLVANIA
------------------------------------------------------------
PROXY SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY FOR THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD APRIL 26, 2000
The undersigned shareholder of P. H. Glatfelter Company hereby appoints
Roger S. Hillas, Paul R. Roedel and John M. Sanzo and each of them, attorneys
and proxies, with power of substitution in each of them, to vote and act for and
on behalf of the undersigned at the annual meeting of shareholders of the
Company to be held at the Company's Spring Grove mill, 228 South Main Street,
Spring Grove, Pennsylvania, on Wednesday, April 26, 2000, and at all
adjournments thereof, according to the number of shares which the undersigned
would be entitled to vote if then personally present, as indicated hereon and in
their discretion upon such other business as may come before the meeting, all as
set forth in the notice of the meeting and in the proxy statement furnished
herewith, copies of which have been received by the undersigned; and hereby
ratifies and confirms all that said attorneys and proxies may do or cause to be
done by virtue hereof.
IT IS AGREED THAT UNLESS OTHERWISE MARKED ON THE OTHER SIDE SAID
ATTORNEYS AND PROXIES ARE APPOINTED WITH AUTHORITY TO VOTE FOR THE ELECTION OF
DIRECTORS AND THAT AS TO THE OTHER PROPOSALS WHICH ARE DESCRIBED IN THE PROXY
STATEMENT, SAID ATTORNEYS AND PROXIES SHALL VOTE AS DIRECTED, OR IN THE ABSENCE
OF SUCH DIRECTIONS, AGAINST SUCH PROPOSALS.
(PLEASE FILL IN, SIGN AND DATE ON THE OTHER SIDE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE)
(Continued and to be signed on reverse side)
<PAGE> 28
/X/ Please mark your
votes as in this
example.
<TABLE>
<CAPTION>
VOTE for all
nominees listed VOTE
at right, except as WITHHELD THE BOARD OF DIRECTORS RECOMMENDS VOTING 'FOR' THE NOMINEES.
indicated below from all nominees NOMINEES: Term Expiring in 2003:
<S> <C> <C> <C>
1. Election of / / / / Robert E. Chappell
Directors: George H. Glatfelter II
Richard L. Smoot
</TABLE>
To withhold authority to vote for any individual nominee, write that nominee's
name in the space below:
________________________________________________________________________________
________________________________________________________________________________
THE BOARD OF DIRECTORS RECOMMENDS VOTING 'AGAINST' THE FOLLOWING PROPOSALS.
2. Approval of shareholder's proposal requesting that
the Board of Directors be declassified (all Directors
elected annually)
FOR AGAINST ABSTAIN
/ / / / / /
3. Approval of shareholder's proposal urging the Board
of Directors to arrange for the sale of the Company
FOR AGAINST ABSTAIN
/ / / / / /
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature _________________________ Date __________
Signature _________________________ Date __________
IF HELD JOINTLY
NOTE: Signature should be the same as the name printed above. Executors,
administrators, trustees, guardians, attorneys, and officers of corporations
should add their title when signing.
